I was amazed at the reaction to my previous Forbes article on Tesla. By simply reading Tesla's 10-Q I was able to find a detail--on May 3rd the company added its Fremont factory to the collateral package supporting its revolving credit agreement--that most had missed and that other news services picked up on throughout the day Monday after my article appeared.
Why didn't sell-side analysts catch the fact that Tesla had mortgaged the company's most important physical asset? Well, to be fair, Tesla did not file its 10-Q until May 10th despite reporting earnings on the 2nd. Given the theatrical performance CEO Elon Musk delivered on Tesla's first quarter conference call that evening, though, no one should be surprised that not all pertinent information was divulged.
For many investors the calculus is simple; Musk is Tesla and Tesla is Musk. His roles as Chairman, CEO and largest shareholder are inextricably intertwined. That said, the extent to which Musk has used his stake in Tesla as collateral to support personal indebtedness is not necessarily well known. So, in the continuing spirit of forensic analysis, I decided to comb through Tesla's proxy statements to measure Musk’s level of personal leverage.
NEW YORK, NY - MAY 07: Business magnate Elon Musk enters the Heavenly Bodies: Fashion & The Catholic Imagination Costume Institute Gala at The Metropolitan Museum on May 07, 2018 in New York City. (Photo by Ray Tamarra/GC Images)
The figures are startling. As of year-end 2017 Musk was using more than 40% of his Tesla shares as collateral for loans. The 13.8 million shares Musk pledged as collateral amounted to a staggering $4.29 billion worth of Tesla stock based on TSLA’s closing price on December 29th. Obviously those figures are not reported in real-time, but market reports on Musk's much-hyped purchase of 33,000 Tesla shares last week--which amounted to a 0.1% increase in his total holdings of Tesla stock--are really inconsequential. The table below displays Musk’s Tesla holdings and borrowings against those holdings since the company’s IPO in 2010.
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